OCZ: Revenues Are Back on Track, Gross Margins Set to Improve

New Chief Exec of OCZ Sees Company Stabilizing

by Anton Shilov
04/18/2013 | 11:53 PM

OCZ Technology Group, a leading maker of high-performance solid-state drives (SSDs) for computing devices and systems, this week provided business update for the fourth quarter of 2013, which ended on February 28, 2013.


As previously reported the company estimated that revenue in each of the unreported quarters ending August 31, 2012 and November 30, 2012 is in the range of $65 million to $85 million. This range takes into effect the impact of the reclassification of certain customer costs from operating expenses to revenue, the significant reduction in channel inventory, the timing of revenue recognition and reserves for product returns.

The preliminary revenue range for the unreported Q4 FY2013 is estimated to be between $65 million and $70 million; OCZ expects positive gross margins for quarter. This is an indication that the operating adjustments regarding restructuring and the restatement are behind the company. Gross margins will continue to improve in the coming quarters due to the streamlining of products and focus on enterprise business. Operating expenses are estimated to be between $23 million and $26 million for the fourth quarter and include non-recurring restatement related charges of approximately $4 million which includes the completion of the internal investigation and other legal matters. The company's inventory levels also continued to improve as inventory on hand at the end of the fourth quarter was less than $50 million and channel inventory was at a 2-year low of less than $20 million.

Unshipped backlog for Q4 FY2013 was approximately $18 million, as NAND flash supply constrained revenue in the quarter and suppliers are allocating certain NAND flash products. NAND supply is expected to affect the first quarter of fiscal 2014 as well. OCZ’s strategy to diversify NAND vendors has helped during this timeframe and is planning for and expects the supply of flash to continue to be tight throughout calendar 2013.

Revenue generated from enterprise solutions are expected to increase sequentially for the first quarter of fiscal 2014, ending on May 31, 2013, which will also contribute to the improvement of its gross margins as many previously engaged customers are now taking product.

"While we know our shareholders are disappointed in our inability to becoming current on our financials by the April 8th NASDAQ deadline, the OCZ team and our auditors are working diligently in bringing this to closure as our review procedures for the accounting of the restatement is taking longer than we had anticipated in an effort to ensure that it is accounted for appropriately. The restatement progress does not change the fact that our business continues to operate effectively and we continue to improve our operational situation," stated Ralph Schmitt, chief executive officer of OCZ Technology

In Q1 FY2014 OCZ lowered its borrowing levels and paid off the credit facility with Wells Fargo. The company then engaged in a loan with Hercules Growth Capital that gave it more capital to continue to improve the business. OCZ was also able to reduce its operating expenses even further in order to lower our breakeven point. The company has drawn $10 million against its $30 million credit facility, has approximately $10 million of cash on hand and are current with its key vendors.